Who's in the Driver's Seat? Mobile Source Policy in the U.S. Federal System

Regulation of mobile source emissions in the US has evolved as a complex combination of central government and decentralized authority. The central government required uniform new car emissions standards in the 1970 Clean Air Act, but gave states the power to meet ambient air quality standards however they saw fit, including various regulations on mobile sources. The 1990 Amendments to the Act strengthened the Federal role in some ways, by requiring tighter new car standards and more specific requirements for fuels and for vehicle emissions inspection and maintenance, but at the same time left states with a great deal of latitude to meet ambient standards and took greater recognition of regional variation in environmental problems. We examine the role of various levels of government in attempts to control vehicle emissions in the U.S., focusing primarily on regulations affecting ambient ozone pollution. Current regulations coming out of the 1990 Amendments are still the subject of much controversy. Several regulations are examined here from the federalist perspective, including the California new car standards and the current debate over "enhanced" inspection and maintenance. We discuss the theoretical basis for national uniform regulations, including production scale economies for new cars, pollution spillovers from one jurisdiction to another, and prevention of state non-compliance with ambient air quality goals. For the analysis of economies of scale in production, we model the trade-offs between gains from scale economies in polluted regions and losses from excess controls in cleaner regions, and illustrate the role of interregional transfers or side-payments. These trade-offs and transfers are particularly important as decisions are being made about whether the "California cars" will be sold only in California or whether they will be sold in the Northeast states and elsewhere. We then look at the debate over enhanced I&M. Finally, we draw some tentative conclusions about the future role of the states versus the central government in US ozone policy.